Update your files that support the cost basis for your nonretirement account investments and your home.

Here's what I do on these:

Our kids spent a week with their grandparents in July, so my wife and I used a couple days then to clean the house. In the process, we identified boxes full of stuff we didn't need or want but that others could use. We hauled some of it to a local charity and had the bigger stuff picked up. So this one is already off our list for August. ;-)

I count on Quicken to maintain the cost basis of my investments. But during the above-mentioned cleaning time I did sort out my investment files -- making sure all the paperwork was where it was supposed to be and anything not needed was shredded. So I guess I'm set here too.

This seems like good advice to me. It's a good blend of taking care of current obligations, helping yourself out for the long term, and having a bit of fun.

The author also advises not to do anything with the money for six months and to store it in a high-interest-rate savings account during that time. IMO, this is good advice too.

I don't think I'll be inheriting much money (if any) from anyone. We did get some money when my wife's father died but by that time we had all of our debts paid and were doing pretty well on our own. I think we saved the entire amount.

How about you? Anyone out there ever inherit a good amount (or are you planning to)? What did you do with it? Or maybe you're planning to leave a good portion to others. Have you talked to them about it?

Complete financial security is impossible. No matter what happens, you can lose your shirt – no bank, no government, no portfolio is foolproof. Risk is simply a part of financial life.

But even though risk is inherent, that doesn’t mean you can learn actionable steps to mitigating your financial or investing risk. In this post, we’ll be discussing on specific method of minimizing your investing risk – learning the safest way to invest in gold.

Gold Speculation is Risky

All speculation is risky. There’s a lot of debate about what “speculation” even means, but a general consensus is this: speculation is when you only profit after you sell your assets. In other words, speculation is all investing where your investment doesn’t earn an income. Flipping real estate, buying gold when it’s cheap to sell when it’s expensive, buying and selling baseball cares – these are all speculations.

An income-earning investment is obviously quite a bit different. It’s when the asset you’ve invested in provides an actual income, such as with dividend stocks, purchasing a small business, bonds, etc. These are all income-earning investments.

Gold speculation, and all speculation in general, is risky because if the price of your investment goes down, you can lose money. If you buy gold at 1200 per oz and it drops to 300 per oz, you’ll probably not make any money for decades – if at all. So, rather than getting a steady 10% return, you could get less than 1%, or if you sell before the value increases, you could lose most of your investment.

Speculation is something even big financial institutions are cautious with – a fairly novice investor has no business making big speculations. I don’t speculate with my finances at all, and prefer to put my money into income-producing investments exclusively.

But what does this have to do with investing in gold? Because the best gold investment isn’t necessarily physical bullion – but mining stocks.

How to Invest in Gold With Less Risk

Gold mining stocks are a safer way to indirectly invest in gold than physical gold bullion. The reasoning is as follows:

Less Volatile. Stocks in general swing less than the price of gold, especially the bigger stocks. There are exceptions, of course, but mining stocks is simply less volatile. That means there’s less of a chance you’ll lose your investment in a price swing.

More Secure. It’s hard to steal a gold mine. It’s a lot easier to steal a couple of ounces of gold. By having your money in gold mining stocks, you’re less likely to get robbed and lose your investment to a thug.

Gives Income. In my opinion, this is easily the best justification for investing in mining stocks and not metal bullion – stocks can provide a steady dividend income. By providing you with a dividend income, you can go ahead and just play it safe and never sell at all. This gets rid of most speculative risk on the part of your investment.

Conclusions

Of course, just because gold mining stocks are less risky than gold bullion doesn’t mean you should necessarily forego investing in physical assets at all. There are still reasons to own the physical product – hedging against a worst-case economic scenario, investing “off the grid”, etc.

In the end, speculation is risky, dividend investing is often less so, and mining stocks are one of the best ways to invest in gold with less risk.

My husband and I purchased our home in July 2007 and locked into a $232,000 mortgage at 6.75%. We did not put any money down. Today our home would appraise for somewhere between $200,000 to $208,000 and we still owe $225,000 on the mortgage. With rates so low, we would like to refinance--either FHA or conventional (somewhere around 4.5%). However, depending on the appraisal value, we will need to bring somewhere between $25,000 to $32,000 to the table for closing costs, appraisal, and to cover the difference between what we owe and what the home is now worth.

We can cover that expense using savings from our high interest savings account, but it would essentially wipe out all our savings (both long term and emergency). However, refinancing would save us around $350 a month which we would then put into doing necessary updates to our home (new windows, etc.). We have no time line on when to leave the home, no other debt, and very stable jobs. We are unsure if we should save and wait a year and hope rates stay low and our house price doesn't fall (many local experts predict house prices in our area have not reached bottom) or if we should refinance now and then rebuild our savings back up in the next few months.

July 28, 2010

George Kinder, a member of the National Association of Personal Financial Advisors and a fee-only financial planner, founded the Kinder Institute of Life Planning. He helped popularize the concept of financial life planning, which begins with the idea that financial advisors should understand their clients' life purpose and structure their finances accordingly. In other words, they should begin with the end in mind. This is both obvious and genius.

Kinder is probably best known for his now famous "three questions" that seek to uncover those goals and values most central in our lives. Number one is "If you had all the time or money you needed, what would you do?"

The response to this question typically provokes a long list of all our desires that money can buy. But with reflection it goes deeper, stirring the longings of our heart. As C.S. Lewis wrote, "One of the dangers of having a lot of money is that you may be quite satisfied with the kinds of happiness money can give."

Our materialistic culture seduces us into believing happiness can be packaged as a commodity and taken home in a shopping bag. As a result, we spend money on goods and services that at best provide fleeting satisfaction and may jeopardize long-term goals that could have brought us real fulfillment.

We may be tempted to judge our well-being not by the quality of our lives but by how we compare with others. Today's borderline poor live as well as the upper middle class did a few decades ago. But they still feel deprived. As we become accustomed to a higher standard of living, luxury quickly loses its luster. We always want more. Kinder's first question gets all these desires out on the table, at least partially, so we can move past them.

Kinder's second question, which can be encapsulated by the phrase "Just a Few Years Left," probes those values that money can't buy. "Imagine that you visit your doctor, who tells you that you have only 5-10 years to live. You won’t ever feel sick, but you will have no notice of the moment of your death. What will you do in the time you have remaining? Will you change your life and how will you do it? (Note that this question does not assume unlimited funds.)"

Take the time to explore this question periodically. A personal five-year plan isn't the sign of an obsessive-compulsive personality disorder. Systematically moving toward our goals is simply living intentionally.

If you have young children, your answer may focus almost exclusively on them and include few, if any, of your own personal goals. Certainly parenthood is a consuming responsibility. But it is only for a season of our lives. And even during that time, parents can often integrate some of their own dreams.

Kinder unfolds all of these ideas in his book "The Seven Stages of Money Maturity: Understanding the Spirit and Value of Money in Your Life." Many of us hesitate to take this personal journey. I regularly get letters questioning what spirituality and values have to do with financial planning. I believe these detractors miss the whole point.

Beth Nedelisky and I teach an Osher Lifelong Learning Institute course each spring, "Financial Planning for Success and Significance in Retirement." In the first class we explore finding meaning in retirement and defining success. A few participants are disappointed that they have to wait until later for the spreadsheets and income projections. But most are glad to talk about why a complete retreat from the working world followed by 24/7 recreation and a shrinking social circle is an impoverished environment for our souls.

We shouldn't shortchange the process of wrestling with the meaning of our lives at any age. Deep down many of us probably know what would be a more satisfying life, but we are afraid to contemplate the implications. Change can be intimidating. The alternative, however, is to keep living a life that in our own eyes may seem unimportant.

Even without small children, significance stems heavily from family and other close relationships. Loving others demands risking and being willing to change and adapt in order to connect deeply. At the end of life, people often regret the risks they didn't take. For many of us, it takes something drastic, like a serious medical prognosis or a near accident, to push us out of our comfort zone.

Often it requires getting older to find the wisdom and the grace to accept people as they are. The virtues of forgiveness and forbearance are necessary to live harmoniously. Relationships can be messy, but they are generally worth the effort. And it helps to remember that what is most important is being the right person, not finding the right person. We can learn to accept people without necessarily approving of their choices.

Once our personal relationships are healthy, many of us want to connect with the outside world and give back to others. Even small efforts to help others can make a significant impact on our communities and change the course of people's lives.

A second realm where people find significance is authentic spirituality. This is more than simply being religious, which is often expressed through practicing a specific tradition. Authentic spirituality often involves the totality of our life in which we seek to have our very identity renewed and shaped.

Compartmentalizing spiritual considerations into a small subset of our lives lacks authenticity. We long for a more meaningful life. At times these issues demand our attention and contemplation. We can start by relying on our spiritual traditions, but outward practices can only take us so far. Authentic spirituality is an odyssey of discovery and personal growth such that the truths learned change the way we live each day.

The third sphere where people seek a deeper and richer life is in the arena of beauty. Many people enjoy exploring their creativity, perhaps through music, the visual arts, or personal writing.

For others this sense of beauty is found in a reverence for nature. Places in the world like the redwood forests of California have a magical quality. Or we may find a special connection with urban locales like Central Park or the back alleys of Venice.

These three realms, righteousness, truth and beauty, are the three areas where most people find meaning and significance. They categorize what is most important to many of us.

I asked George Kinder about people's life goals and he said, "Sometimes I wonder why it is that so many of us make foolish decisions around money. Even with good advisors at our side, it seems. And then I reflect that perhaps the reason is that we have never really figured out what money is and what it's about. We think it's about spreadsheets and bank balances and rates of return and stock markets and buying things and getting into debt. Or at least those are some of the categories that might come up for us.

"But money really is the great facilitator of what is most meaningful for us in the world. It's meant to help us put together a life that best expresses our own individual genius, our brilliance, our creativity, our compassion, our values, our integrity, our spirit, our mission in life, what is most important of all that we realize and become."

Some thoughtful responses to these life planning exercises can help us set goals that are both meaningful and deeply personal and help us truly value our lives. Take the time to reflect on what you would like to do or be to live life to its fullest. Next week we will move on to the third life planning exercise.

My wife and I are 26 years old, and we gross about $130k annually. We just finished paying off roughly $68k in student loans. We have no other debt except our house. My question deals specifically with paying off our house. Here are the important facts:

Our current house payment is $750/month (not including taxes and insurance).

We owe roughly $142k, which is basically 100% of the house's value since we did not put any money down on the house. However, we do not pay any Private Mortgage Insurance (PMI).

The current interest rate is 4.69%

Our current mortgage is a 5 year balloon mortgage that we originated in May 2009. In May 2014 we will either have to pay off the house or refinance.

These are the two options that I'm considering:

Pay the house down to about 70% loan to value (about $100k) and refinance on a 15 year fixed rate. We could probably have the cash for this around January. This would give us a similar payment to our current mortgage - but on a 15 year amortization schedule. After we refinance we will begin contributing 15% to retirement, which would allow us to pay off the house but in about 5 additional years.

Continue our aggressive debt snowball and pay off the house entirely in about 3 years. After we pay off the house we max out our 401k and Roth IRA. Prior to paying off the house we contribute no more than $2500/year to Roth IRA's. The risk with this choice is that we may not make it and still have to refinance.

What would you suggest?

Other information for consideration:

We have roughly $12k in cash. I’m building cash for a $20k emergency fund, but I will use most of what I save over the next few months to refinance if that is direction we go.

We have roughly $3k in Roth IRA's

We give about $400/month

We do not contribute to retirement on a monthly basis, but we will contribute at least something to our Roth IRA's before April 15. I'm not sure that we will max it out though.

We both want to live in a house we own outright, but I want to balance this desire with the need to contribute to retirement.

I've listed six times it's easy to ask for a discount, so if you're embarrassed to do so (like the questioner), here are some other times when you shouldn't feel "bad" about asking.

I often use the web to search for discounts/coupons and have saved a ton of money on all sorts of items this past year using them. It's still not an automatic habit and I need to remind myself to search for a coupon before I make a purchase.

My son got a great deal on soccer shoes simply by keeping his eyes open. Every time we go to a sports store he looks at soccer shoes. One time they had an $80 pair that had been purchased, used (probably once -- they were as close to new as they could be), and returned. They were his size and priced at $20. He snatched them up, used them for a season, then had the chance to sell them for $10 to a teammate. He decided not to, but he could have "rented" an $80 pair of shoes for $10 if he wanted. ;-)

July 27, 2010

I've read your blog for a little while now, your posts are very helpful and make for an enjoyable read. But what further advice would you give to a college freshman?

For instance, I just turned 18 and set up my own Checking and Savings accounts apart from the savings account previously held under my parents' account. What specifically can I do right now to set myself up for financial success? Because of college bills, I won't have much money to use but I'd like to get some kind of "head start" on my future finances. I'm trying to read a few financial blogs to at least get informed on personal finance but I'm still unfamiliar with many terms and processes. I'm going to a private school with about 1/3 paid for by scholarship, and the rest to be covered by myself and my parents -- without loans.

What would you advise?

I sent him a few suggestions, but thought you all would have some wisdom to share. What's your advice for him?

In my post titled The Joy of Wealth, FMF reader Old Limey (who's retired) made the following comment:

To give you an idea of how I spend my days. Yesterday was the day my hiking group rents a luxury motorcoach that costs us each $30. Thirty five of us were driven to a beautiful county park on the California coast between Santa Cruz and San Francisco where, in gorgeous weather, we hiked through a beautiful Redwood forest. The group splits up into small groups according to ability. I go with the fastest group, that the others call, "the Rabbits", and we did a hike I estimate to be about 12 miles. I can't say for sure because my GPS lost satellite coverage in several of the steep canyons we went through. There were just 5 of us, myself and two old friends and two newcomers (each 46) that were still working but had flexible hours. One was a PhD in electrical engineering, the other was an Iranian lady that was also a PhD and a clinical biologist at a local hospital. What more can you ask than to be doing something that's very healthy, great for the psyche, have intelligent conversations, and to meet two very interesting new friends, all for $30.

This is the retirement many of us imagine -- days filled with fun and excitement. But to enjoy a retirement like this, you need two things: money and your health.

Let's consider various money and health combinations and what sort of retirement they give you:

Enough money and good health -- The great retirement described above.

Enough money and poor health -- Depending on how bad the health and how much money you have, it could be an ok retirement or quickly turn into a big mess.

Not enough money and good health -- Though far from ideal, at least you can still work (which is what many people are counting on.)

Not enough money and poor health -- You're counting on the government and/or family to take care of you.

Thankfully, one of the key factors to retirement success is fairly controllable. If you take a few simple steps (and avoid some others), it's likely that you'll be wealthy when you retire. But having your health is less certain. Sure, you can eat well, exercise, get enough rest and so on, but accidents, heredity, "fate", and a variety of other things can still conspire against you.

This gets to the "do you spend your money now or later?" question that people bring up here from time to time. The "spend it now" group argues that you have your health NOW, so why not enjoy what you have while you're young. It's not often said but it's certainly implied that retirement can take care of itself later. Unfortunately, we know that this is not usually what happens.

The other point-of-view is the "save now and enjoy life in retirement" group. This way of thinking focuses on putting money aside for that one day when you can enjoy a lifestyle like Old Limey's. The one problem here: you never know if you'll have your health or not when you retire.

I bike to work 2 to 3 days per week during the summer and occasionally (if it's reasonably dry and warm) in the other months. I've analyzed this many times, and here are, in my view, the pros and cons (both financial and otherwise):

Pros:

Obviously, there is a savings on gasoline. If your car gets 20 mpg and gas costs $3 per gallon, gas costs you about $0.15 per mile.

There is an additional savings on car maintenance. Most cars require scheduled maintenance every 15,000 miles which costs at least $500, plus it's safe to assume another $500 of mileage-driven unscheduled maintenance every 15,000 miles. Add in an oil change every 3,000 miles at a cost of about $20, and that's about $1,100 of mileage-driven car maintenance every 15,000 miles, or about $0.07 per mile.

There are other indirect costs of driving, some of which are unfortunately largely fixed if you simply own a car - taxes, insurance, depreciation, etc. In the case of taxes, there is no break for biking to work once in a while. I'm also not aware of insurance companies giving a discount for those who bike to and from work on occasion, although it would seem to make sense, given that this reduces the risk of loss to the insurance company. Market value depreciation is largely time driven but also mileage driven to some extent, so there is a savings there, very difficult to calculate.

Some employers (and some local governments) give financial incentives to people to bike to and from work. The city I live in has a site where you can register your bike rides and after 50 roundtrip rides, you get a $50 Amazon gift card (I guess they trust the honor system on this one).

If you are able to completely give up your car and bike (or walk / take public transit) 100% of the time, there are potentially substantial savings. Aside from the taxes, insurance, depreciation, etc mentioned above, you may also be able to save the cost of your parking spot if you are a renter or live in a condo. Also, some employers give incentives - my employer will give you $200 per year to give up your parking pass altogether.

On the non-economic side, bicycling provides an excellent leg and cardiovascular workout (come to think of it, this could have economic impact as well insofar as it could keep you healthier and result in less costly medical care later on).

My employer benefits when I bike. I am much more mentally alert and energetic on the days that I bike compared to the days that I drive. Therefore, my career may benefit long-term from biking to and from work.

Speaking of careers, I recently bumped into the CEO and CFO of my company in the locker room after a morning ride in to the office. Okay, so the men's locker room at work is not exactly the ideal place to network. But these guys at least know my face, and it's nice to know that senior leadership of my company looks favorably on employees who get physical exercise and choose this non-traditional means of getting to work.

I'm politically libertarian, and I hear my liberal friends talk a great deal about green things, and how green they are for driving a Prius. I don't do many of the environmentally friendly things they do, but when I tell them I bike to work fairly often, it usually gets them off my case. :)

Cons:

While a bike is clearly cheaper to purchase than a car, they don't give away bikes for free. I suppose a used bike could be had reasonably cheaply on Craigslist or eBay or something similar. A good quality, new bike will run at least $200 to $300. I know guys who have spent upwards of $2,000 on a bike. Because of low back problems I have had, I need a bike with upright handlebars and some suspension, so I bought a commuter/comfort bike for about $400 about three years ago and it's held up very well.

Bikes have accessories. Some are required (i.e. ~$50 for a good helmet, ~$10 to $20 for lights and reflectors if you ride after dark, etc), some are optional (i.e. specialized clothing and shoes, saddlebags, etc).

Similarly, while bike maintenance is cheaper than car maintenance, they do require maintenance. A tune-up once per year will run $50 to $100, although my employer subsidizes this for those who ride (I paid $15). Bikes also eventually need tires, brake pads, seats, etc replaced. If you ride as often as I do, you can count on $50 to $100 of unscheduled "maintenance" on top of the scheduled tune-up.

There is risk of injury when riding a bike (of course, there is risk of injury when driving a car, too).

Depending on the length of your commute, biking may add a significant amount of time, especially when you factor in a shower and change of clothes on either end. When my commute was 10 miles each way, driving took about 30 minutes in the morning and 45 minutes in the evening, while biking took an hour either way plus 15 minutes to shower and change. Now my commute is only 5 miles each way, so driving takes about 20 minutes in the morning and 30 minutes in the evening, while biking is about 30 minutes either way plus 15 minutes to shower and change. So at 5 miles, there is not much time lost but at 10 miles, there is.

In the car, you can listen to the radio or a CD/MP3 or carry on a (hands free) phone conversation. On a bike, you cannot safely do any of these.

I used to bike a lot (roughly 2,000 miles a year) before I started swimming as my main exercise, so I'm pretty familiar with this subject, and I can say this list is pretty good. A few comments I'll add:

While I rode all those miles, I never biked to work (I did drive my bike to work -- hooked to the back of my car -- to ride with friends from work.) Why? My main issue was that I would be riding in the dark for much of the trip in -- something I wasn't really keen to do.

I agree 100% that biking is a GREAT exercise and has many benefits -- both financial (saving you on health care costs) and non-financial (potentially helping you live longer and enjoy life more.)

Biking is dangerous if you ride the roads. I've had numerous friends either hit by cars or "eat it" in some form or fashion (one even crashed on a bike trail -- he wasn't paying attention and hit the metal bar designed to keep vehicles off the trail). When you consider that you're risking your health/career by riding to work, and that your career is your most valuable asset by far, the economics of riding to work aren't that good any longer. That said, is it really THAT dangerous? I'm not sure.

Yes, you can listen to an MP3 player on a bike. I did all the time. I listened with one ear and left the other ear open to listen for traffic.

The whole "shower afterwards" thing is a hassle. You either have to bring your stuff in (by car) the day before or somehow carry it with you on your bike as you pedal in. And many people don't even have a place to shower at work. That's one thing I like about swimming -- showers are part of the deal. Of course, you can bike almost anywhere but you can only swim in certain spots (I'm lucky to have an Olympic-size ten blocks from my house and 12 minutes from work.)

I have a few friends that bike to work and they love it. As Brad says, they think it puts them in a better mood for the day. Plus, by the time they get home, they don't have to make time to exercise -- it's done.

So what's your take on biking to work? Good idea? Bad idea? Or somewhere in between?

July 26, 2010

Our son is about to turn 1, and my husband and I have agreed that we don't want people to buy him gifts for his birthday, but would instead prefer people consider giving money for his college fund. We have seen other nieces/nephews have birthday parties where the amount of toys they ended up with was out of control (we have a fairly large family on both sides). Although my parents like this idea, and support it, I'm not sure how to make it more widely known without coming off rude.

We would love to celebrate his birthday with our close friends and family, but we don't want people to feel like gifts are necessary. I do understand that many people will want to give gifts though. I'm trying to find the right balance between not ending up with more toys than he needs or has room for, and looking like we are "asking for money" which I feel comes off as crass and rude. Maybe this is more of an etiquette question than a finance question, but how do you (or your readers) handle that fine line of what is and isn't socially acceptable?

For those of your who missed my announcement on Friday, I just wanted to reiterate that FMF is now up on Facebook. If you're on FB a lot and prefer to keep up with FMF that way, it's now an option for you.

A few thoughts I want to share regarding FMF and Facebook:

The site is just bare-bones now. I hope to spruce it up in weeks to come.

My feed didn't pull over the weekend, so I'm wondering if everything is working yet or not. I'll get it fixed eventually and will post links manually if need be until we get to that point.

107 "likes" over the weekend! And it's GREAT to see some faces of who's reading FMF. Very cool!!!!

So if you'd like to stay in touch with FMF via Facebook, here's the link to get set up. Enjoy!!!!

This article is about looking at money in a different way then you're used to - about transforming how you value each expense.

More specifically, about using two mind hacks, that will make you look at money differently from this day forward. Lets get right into it.

Mind Hack # 1: Reverse 4% Withdrawal Rate

A general rule in retirement is that you can withdrawal 4% of your investments each year. This withdrawal rate, combined with the proper asset allocation, should make your money last forever.

Therefore, if you want to live off of $50,000 a year, you would need to accumulate $1,125,000 in your retirement portfolio. A $1,250,000 portfolio is very achievable if you have time on your side

But what if you don’t have time on your side and can’t afford to save 50% of your income. Just use the reverse 4% withdrawal rate to see how much less you would need to accumulate if you cut your expenses.

For every $10,000 less you spend each year, is $250,000 less you need to accumulate to retire. If you can manage to get your expenses down to $40,000 a year, you only need $1,000,000 in a retirement portfolio. Could you live on $30,000 a year? Then you only need to save $750,000.

If you know your annual expenses, try doing a simple calculation. Take your annual expenses and divide them by .04. This is roughly (a lot more goes into this calculation) the number you will need to accumulate in your retirement portfolio, to maintain your current standard of living.

For example, if your annual expenses are currently $50,000 a year, divide 50,000 by .04, which equals $1,250,000.

The next step is to see the difference between the amount you need to accumulate now and the amount you would need to accumulate in the future, if you were to cut your expenses. By doing the same calculation as above, but this time with a reduction of expenses, you would find that:

A 5% reduction in expenses, would mean you would have to accumulate $1,187,500

A 10% reduction in expenses, would mean you would have to accumulate $1,125,000

A 20% reduction in expenses, would mean you would have to accumulate $1,000,000

A 50% reduction, would mean you would have to accumulate only $625,000

Using the 4% withdrawal calculation made me transform the way I look at every expense. I hope it can do the same for you.

Mind Hack # 2: Stop Thinking % of Paycheck and Think % of Life

Say you make $30,000 a year after taxes and you're about to make a larger purchase, such as a car. For simplicity reasons, you're putting zero percent down and make payments of $400 a month.

Since you're making about $2,500 a month, $400 is probably no big deal right? It's only 16% of your paycheck.

However, what if instead of comparing the ratio between payment and monthly income and calling it a day, you took that 16% and multiplied it by 240, the average amount of workdays in a year.

What does this number represent? It shows you how many days a year; you’re working for your car. In the example above, you would be working 38 days a year or about all of January and February, just for your car. Would you rather have that new car or take two months off to start the year?

Moving Forward

I challenge you to look closely at your major spending categories (shelter, food, health care, and transportation) and apply the two mind hacks above.

If you're spending 40% on rent or mortgage, how would your life change if you only spent 20%? How much less could you retire on? Could you start working part time?

If you start thinking differently today, you can start living differently tomorrow.

So, how many people have the degree but do something totally different? I have a degree in advertising, but worked in insurance before staying home when I had kids. Hubby has a degree (BA) in psychology, which is probably about the equivalent of that social worker degree. He is in IT and has never done anything in the psychology field. My brother is probably more knowledgeable in some IT areas than my husband, but he cannot get a decent job in IT because he has no degree. So, is any degree better than no degree?

Here's my two cents, then I'll let you all chime in:

I personally work in the field that my degrees are in (business/marketing.)

That said, I know scores of people who have a degree in one thing (like "education") and work in a completely different field. My dad spent a great part of his life working in an area totally different than his degree.

Is any degree better than no degree? In most cases, I do think that any degree is better than no degree. Look at the data and college grads make more, have more opportunities, and get considered for positions that non-grads don't have access to (example above). That said, there are times, and they appear to be increasing in frequency, when a college degree is a bad decision. One clear example: when a person borrows a huge amount for a degree that has no chance of paying back its cost.

In the end, I think a college degree is like any investment -- will you get back more than what you put in (some of which could be intangible benefits)? If so, it's a good deal for you. If not, you're probably better not to get a degree.

July 25, 2010

"Command those who are rich in this present world not to be arrogant nor to put their hope in wealth, which is so uncertain, but to put their hope in God, who richly provides us with everything for our enjoyment. Command them to do good, to be rich in good deeds, and to be generous and willing to share. In this way they will lay up treasure for themselves as a firm foundation for the coming age, so that they may take hold of the life that is truly life." (I Timothy 6:17-19, NIV)

1) First, Paul signals who he's writing to: Those who "are rich in this present world."

2) Next, Paul gives two "not to" commands. He says that those with money are not to be "arrogant" or to "put their hope in wealth."

3) But, now Paul turns his attention to the positive side of wealth. Without any explanation or apology Paul says that it's okay to have nice things. He says that God provides us with "everything" (presumably this includes financial blessings) for our enjoyment!

4) Paul's last directive is a positive one: "Command them to do good, to be rich in good deeds, and to be generous and willing to share." Sure it is perfectly fine to enjoy some of your wealth personally. But Paul also reminds us of the greater good we can do with our wealth.

5) Like a loving counselor, Paul seems unable to leave the topic without reminding his readers of the blessings that follow such a lifestyle.

In particular, this specific point is something I've been grappling with -- how rich almost anyone in America is compared to most people in the world:

Let me suggest that the "rich" people to whom Paul is speaking would probably include most of us today. Although you may not think of yourself as wealthy -- compared to most of the world (especially in Paul's time) we are all filthy rich! If you have a bathtub you're better off than 70% of the rest of the world. Only 30% of the world's population can read, and less than five percent own a computer! If you have never faced the horror of war, the pain of imprisonment, or the pangs of starvation, you are ahead of 500 million people throughout the world. If you have clothes in the closet, food in the fridge, and a place to sleep, you are richer than 92% of the rest of the world!

A few comments from me:

Much of this line of thinking is similar to Andy Stanley's series on how to be rich. It's a great set of teachings if you're looking for some Christian-based financial guidance.

In Stanley's series, he notes that rich people have many advantages that others don't:

They have "homes" for their cars. Many people in the world are lucky to live in what we would call a shack. But many of us in America have nice homes even for our cars (we call them garages.)

They have so much drinking water that they spray it all over their lawns to make sure their grass doesn't die. Many people around the world drink filthy water they have to haul miles to get. But we use gallons of perfectly good drinking water to make sure our plants live.

They have times when they don't have to work and they still get paid. It's called vacation time.

Of course, his point is that compared to world standards, we're all pretty well off.

If you want to see if you are "rich", you can check out this post.

There's a line of thinking in Christianity that we should all "give it all away." I like that these verses have balance -- we should enjoy some and we should give some. Very similar to my line of thinking in Giving is a Complement to Wealth, Not a Hindrance.

July 24, 2010

Thoughtful wealth management is more than just maximizing net worth. It also gives us the best chance of meeting our life goals. Wealth is only valuable because it helps us make a significant impact on our world. It doesn't give us meaning.

Life planning takes a holistic look at what you truly value. And for most people, their life is more important than their money. Only after exploring your life goals can you structure your finances to help you realize your dreams.

A fee-only fiduciary wealth manager sits on the clients' side of the table. With a deep understanding of clients' goals, the professional can manage their money just as the clients would if they had the same expertise.

We begin the process with a preliminary questionnaire that poses a series of easy questions to help us learn about a client's goals and values. We ask, "What charitable and/or professional organizations do you support? What interest/hobbies do you enjoy? What gets you out of bed in the morning? What would you like to be doing five years from now?"

This allows us to begin to know our clients at a deeper and more revealing level than what we learn from a tax return and net worth statement. It is difficult to write about life planning without sounding religious or moralistic, which is the point. Ultimately, our financial decisions are spiritually based. The process of financial planning pushes us to articulate which values we want to live by and motivates us to adjust our daily monetary decisions to fit those values.

Spiritually sensitive financial advisors, regardless of their specific perspective, ask astute questions that reveal these values. Christians, Zen Buddhists and many other perspectives share this common framework that spiritual concerns are critical. For example, George Kinder, author of "The Seven Stages of Money Maturity: Understanding the Spirit and Value of Money in Your Life," approaches life planning from such a perspective. He uses a series of three exercises to help people sort out when they might need to change direction. Each one is an experiment in which you ponder one potential scenario and imagine all the possible ways you might react.

The first one, called "Plenty of Money," starts with one of Kinder's famous "three questions":

"Imagine you are financially secure, that you have enough money to take care of your needs, now and in the future. How would you live your life? Would you change anything? Let yourself go. Don't hold back on your dreams. Describe a life that is completely and richly yours."

This scenario is playful and fun as well as revealing. I've seen several variations, such as "What would you do if you won the lottery?" or "What would you do if you had a million dollars that you couldn't spend on yourself?" But Kinder's format is probably the better one because it purposefully focuses not on the money but on your life's calling.

Like Eric Liddell in the film "Chariots of Fire," we are searching for meaning in our lives. He says, "I believe God made me for a purpose, but he also made me fast. And when I run I feel His pleasure." We are looking for a life so completely and richly ours that we feel God's pleasure. This is our area of genius. This is our calling.

This exercise may not result in a practical life change when you are done. But it will begin to uncover some of your inner longings that currently may be eluding you.

Another excellent way to explore this process is Barbara Sher's book "I Could Do Anything If I Only Knew What It Was." Subtitled "How to Discover What You Really Want and How to Get It," it offers practical ways to expand on Kinder's scenario and find your heart's desire.

You've probably heard the saying "Find a job you love and you will never work a day in your life." Studies show that deep joy comes from knowing exactly what you want and feeling like you are moving toward getting it.

Sher suggests the next time you are with a group of strangers, tell them the most offbeat idea you can think of. Say your dream is to raise Dalmatians in the Himalayas, but you have no contacts in Tibet.

People's interest perks up. They may even try to solve your problems. Some may react negatively, but most suggest ideas. But describe the same scenario to your family or friends, and they will try to save you from your folly. And that is one reason why we find it so difficult to dream long enough to determine what our dreams really are.

Another of my favorite exercises in the book comes after you create an ideal scenario. Sher then asks you to act on it for only an hour: Get the application. Find out about the job. Call some contacts. Make an appointment.

She says that planning is mostly science fiction, just a hopeful prediction. But following a plan gets us out into the world where something can happen. Anything that moves us toward what we want makes room for serendipitous events. It also forces us to confront any hidden resistance within us.

Finding our life's goals requires quiet times of thought and reflection over a long period to learn about ourselves and our place in the world. And often it takes experiences we can only have by trying a number of different endeavors.

All of this may sound too fuzzy or creative, but nothing is more important in the wealth management process. Balancing a family's financial goals and making financial choices according to those values is at the heart of comprehensive financial planning. Financial woes often come not from a lack of income, but from our failure to live according to our true values.

Take some time to imagine how you would live your life if you had plenty of money.

July 23, 2010

Just a short note to say I've just started an FMF Facebook page (yes, I realize that I'm the last blogger on earth to do this.)

For those of you who like to visit/keep up-to-date via Facebook, you can "like" FMF and read my content over there if you prefer. And at this point, you can be the first to "like" me (why do I feel like the kid no one picks to play dodgeball?) ;-)

We've discussed Social Security's place in retirement planning quite a bit here. Several commenters have brought up the fact that Social Security is meant to be a supplement to retirement savings, not the majority (or even all) of it. I agree -- that's what it's meant to be.

As a proportion of their respective populations the Midwest had a higher concentration of these high-net-worth people.

The concentration of millionaires next door in the Midwest is 1.65 times greater than what is expected given the size of its overall population. The South is also above the norm with a multiple of 1.2, while California and especially the Northeast areas of the United States have less than half the expected number given their overall household population.

The traditional values of thrift and modesty in spending are still alive in many parts of the Midwest.

He goes on to share a few stories that illustrate this last point -- that people in the Midwest are more likely to control their spending and not worry about appearances/"keeping up with the Joneses." It's this ability that he says allows them to have much higher than expected net worths.

I'd add one thing to this: it's cheaper to live in the Midwest (and the South for that matter) in general (I say in general because it's probably more expensive to live in downtown Chicago -- in the Midwest -- than it is to live in a rural part of New York state.) There's no doubt that some areas of the country cost more to live in and some cost less. Guess which ones cost more: California and the Northeast areas of the United States. Guess which ones cost less: the Midwest and the South. Coincidence? I don't think so.

The following is a guest post from Marina Shifrin, a writer for My Bank Tracker.

To start out I must say I am far from fortune and even further from fame. I am however; a college graduate with flawless credit, a large financial cushion and absolutely no debt or student loans—all thanks to some smart money moves my parents made.

I would like to preface this list by saying my parents did not come from old money. In fact, when my father was 40 he decided to leave all of his possessions in Russia and move my mother and I to America with less than $300 to our name. This being said, I believe people from any financial background or social status can pave the way for their children’s success.

Here are three steps you can take to enable your child with tools for a thriving financial future.

1. Put Your Kids to Work

When I turned 14 my parents lovingly told me that they would provide food and shelter but anything else would be on my bill. At the time, my typical teenage mind thought, “This is like, totally unfair!” All my friends were getting allowances and didn’t have to do anything for it. I soon accepted my fate and started asking around for babysitting jobs. When I got a little bit older I found a waiting job at a local restaurant and in the summer I also worked as a camp counselor. Being able to appreciate the value of a dollar followed me into my adult life. In college I worked many different jobs. Upon graduation, my diverse work experience gave me a competitive resume helped me land a post-collegejob quickly.

Work permits and age limits can differ from state to state. To find out more information check out The U.S. Department of Labor site here.

2. Start Saving Up

As soon as my parents found out how expensive college is, they started looking into different options. Education was put at the top of their priority list and consequently was put at the top of mine. I believe the smartest decision my parents made in regards to college savings was starting a 529 Plan. You can either choose to pre-pay tuition or set up a college savings, both categories have multiple plans under them. A Big benefit to these plans are that they are tax-advantaged meaning they are not subject to federal tax and in some cases state tax.

Encourage your child to do everything he or she can to help with college costs. Just because they are young and may not have money saved up does not mean that they can’t make a big contribution to help with college expenses.

In my household we were taught, What’s mine is yours. This includes college expenses. My parents sat me down before I left for school and explained that they could only cover about two years comfortably. I was never under the impression that my parents had the funding to completely cover the cost of college. Desperate to help pay for college so that I could continue my education, I found work as a Resident Assistant and was able to cover room and board for two years (totaling around $17,000). I also stayed there over the summer and worked while getting residency: knocking off another $10,000 a year. Both of these options helped cover college without incurring college debt.

3. Get a Credit Card

This may seem like strange advice considering the bad relationship America’s youth has with credit cards. Just because your child gets a credit card, does not mean they have to use it.

A debit card has taught me not to spend money unless I have it: a rule that may be difficult to follow with a credit card. At age 18 my parents got a credit card under my name and have been making small purchases (i.e. groceries, gas etc.) on it ever since. I am 22 years old and have never even touched a credit card. I have good credit without the temptations that usually come along with owning a credit card. It is important that your child starts establishing good credit as early as possible for bigger purchases later down the line.

Establishing strong work ethic, good credit, and financial literacywas a big goal in my family. My parent’s push to teach me about money matters at such a young age allowed me to budget my money wisely and achieve many goals that debt would have hindered. I am confident in my future and owe all of that to my parents.

July 21, 2010

I just finished up the process of moving my IRA from Fidelity to Vanguard. I am wondering if I should purchase their ETF index funds or their mutual fund index funds. The ETF fees are lower, but you have a transaction fee when buying or selling shares which could run up costs when rebalancing. I've checked out Vanguards ETF vs Mutual Fund calculator and it predicts that over my 30 years of saving that using an ETF would be a wiser choice, however this does not take into account the 6 month rebalancing that I would do each year.

Millions of Americans are currently facing a crisis with their credit card debt. The rise in unemployment and underemployment, the bursting of the housing bubble, the extraordinary tightening of lending standards and poor consumer spending habits have all contributed to this situation. Getting out of it can be extremely difficult, especially if the interest rates are high and minimum payments are all that can be made towards the debt. Repayment timeframes can literally extend to decades in many cases if the consumer continues to pay down the debt in this fashion, meaning that it can not only cover the remaining working lives of these borrowers but it may even continue into their retirements as well. In the event that you’ve found yourself in such a plight, here is a list of tips that I hope will help to save you some money, ease your financial burden and bring the light at the end of the tunnel (becoming totally debt-free) within sight.

1. Stop using your cards

This may go without saying, but I want to make sure that you don’t add to your present problem or undermine your future efforts to pay off your debt. Use only cash for your purchases and if you can’t afford it, then don’t buy it. You may not be able to do this completely at first without passing on some necessities, but try to reach the point where you’re living on cash as soon as you possibly can. Then take the cards out of your wallet and leave them at home in a safe place to use only for true emergencies.

2. Contact your creditors

Collect all your most recent account statements and organize their pertinent information on a separate page. Note the account number, balance, interest rate, minimum monthly payment and payment due date for each. Then call each creditor and tell them that you’ve been struggling to make the minimum monthly payments on your accounts, but that you are trying to do the right thing and pay off your debts. Ask them if they would consider reducing your interest rate so that you can pay them what you owe them. If they decline to help you, be polite and try asking them again periodically.

3. Pay off your highest-rate cards first

Pay as much as you can reasonably afford each month towards the card with the highest interest rate. This could change at times if you’re able to get your creditors to reduce their interest rate at a later time, so stay on top of any changes that may affect to whom you’ll be paying the most money. Make sure that you continue to make the minimum payment each month on all of the other accounts.

4. Analyze and reduce your expenses

Make a detailed list of all your monthly expenses and see where you might be able to reduce them. Then use the money you save to pay off your credit cards. Another good idea is to carry around a pocket-sized notebook for a month noting all your expenditures, no matter how small. You may be surprised at how much money you’re spending on items that aren’t essential. (Remember that any extra money you can come up with will pay down the principal balance of your highest-rate card.) Use the new information to revise your earlier list of monthly expenses, and once again see where you can free up some more money to pay down your cards.

5. Consider moving into a less expensive place

This may or may not make sense for you, but perhaps you’re living in a place that’s larger or more extravagant than you may actually need. This could save you considerable money over the long term. Don’t forget to consider the moving costs into the equation if you’re thinking seriously about this.

6. Consider renting out a room

Again I realize that this may only apply to some of you, but if it does it’s a great way to pay down your debt faster and save yourself some big money in finance charges over the long term. You may even already know someone who would be a good candidate. Consider this option carefully, as you don’t want to make a mistake that will end up costing you your tranquility at home.

7. Have your paycheck direct-deposited

Many employers offer this option to their employees, so check with them and see if you can do it. It’s much easier to keep from spending unnecessarily if the money never passes through your hands in the first place. There is some truth in the adage: “out of sight, out of mind”. Having direct-deposit can also save you the time and hassle of going to the bank to deposit your check, and it then makes a special trip necessary if you want to take some of your paycheck in cash. Don’t make it too easy for yourself to spend money.

8. Get a part-time job

Having another source of income can help speed up the repayment process too. When you consider that everything you take home can go directly towards the balance on your highest-rate card, it increases the value of the extra income you earn. Compare this scenario to the current one in which you’ll otherwise be paying additional finance charges from your present lower income amount. Over time this can make a big difference for you.

9. Find creative ways to make some money

Try selling some things you don’t really need on eBay, Craigslist or Amazon such as CDs, DVDs or other items that you may no longer be using. Garage sales are another great way to raise some cash and simplify your life at the same time. Remember that the proceeds can all be used to pay down your principal and reduces your finance charges on your debt.

10. Eat more home-made meals

This is a great way to save some extra money and get better control over what you put in your body at the same time. Eating meals out at restaurants can add up very quickly. When you do have to eat out, consider a place where you don’t have to tip, and just drink water instead of ordering a beverage all the time and padding your bill. Bring snacks with you to work instead of pumping money into a vending machine. Keep some snacks in the car to avoid having to stop at a convenience store if you get hungry.

11. Learn to become a smart shopper

There are many ways to cut down on your shopping bill, and I won’t try to cover them all here. But consider the fact that a good used CD or DVD will play the same as a new one, and that many people end up selling barely-used exercise equipment and recreational items at big discounts. Stock up when you see exceptional sales prices on good, nutritious foods that you enjoy from the supermarket. If you have more time than money, you should know that thrift stores can have new or almost-new items at ridiculously low prices that can substitute for something you would otherwise buy at the mall. You’ll be amazed at how much fun treasure-hunting can actually be, as you never know what may show up in these stores. I’ve seen everything from brand new furniture, high-line TVs and stereo equipment in perfect condition, and brand new designer shoes and clothing with the tags still attached, all selling for literally pennies on the dollar. Just remember that not all thrift stores are created equal, so don’t just try once and then decide that it’s a waste of time.

According to AARP, research suggests that about half of today's older people will spend some time in a nursing home -- from as little as a few weeks to as much as five years. AARP cites several factors that could increase your chances of going to a nursing home:

You live alone or have no relatives who could care for you at home.

Your family members tend to live into their eighties or older.

Your family has a history of heart problems, high blood pressure, diabetes, or some other serious or chronic health problems.

Your family has a history of stroke or Alzheimer's or Parkinson's disease.

I'm a ways away from making the long-term-care insurance decision, but my parents are certainly in that range. In fact, they're probably past the best time to buy LTC insurance (too old).

Anyway, my family history is scattered -- one grandfather died in his early sixties and one died in his seventies. One grandmother died shortly after childbirth and the other lived to 95 (even with diabetes.) My dad is relatively healthy but my mom has had cancer (but she's smoked for 40 years or so.) We have some history of strokes and diabetes, but nothing major. So, I have a lot to think about.

Anyone been down the long-term care insurance road? What did you decide to do and why?

July 20, 2010

In 2004, Forbes.com featured a list of the most expensive sports. While the very top of the list was populated by the more exotic recreational activities like sailing, car racing, and flying, golf is a sport that is popular among the upper and middle classes alike. Still, golf made the list, and if you want to regularly sink a putt without making your finances a veritable sinkhole, here are a few things to think about.

1. High end clubs are for low handicaps.

Many will judge the perceived value of quality equipment by its price. While brand name clubs are high quality, you won't get much use from them if you have a mid-range or higher handicap. The most expensive clubs are for pros and showoffs. Go for the knock offs or used ones instead.

2. Keep track of your balls.

Nothing wastes more money than lost balls, especially if you prefer softer balls with better traction. While it can be trying to hold up a game while chopping through the rough or fishing in the pond, in the end it's worth it. Take a few minutes to look before giving up. Keeping track of other little things--to whit, tees, gloves, etc.--is also critical in the saving process. Trust me. It all adds up.

The golf gadget industry is akin to products sold on infomercials. They make big promises, they're often sold in multiple payments of 19.99, and they don't help much in lowering your score long term. The best investment you can make in improving your handicap is practice and lessons.

4. If you enjoy golfing while traveling, plan vacations to golf hotspots.

When golf courses compete against each other, then you'll be sure to seal some good deals on rounds. When planning family vacations, see if you can negotiate with other family members in terms of location.

If you don't already have a golf membership, consider getting one. While many of us don't like being tied down to one course, member benefits enable savings that will surprise you.

6. Make friends with golf club members.

Of course, it's not necessarily reasonable to base friendships on the game of golf, although it's tempting to think so considering the game's addictive, hypnotic qualities. When meeting people for the first time at different social events or just by random chance, be sure to throw in your golfing interest in conversation. Golfers come in all stripes and colors, so you'll never know a stranger's shared passion if you don't bring it up. You'll make a new golf buddy and you may just end up saving some money in the process. Who doesn't want that?

7. Be choosy with your boozing.

Golf and the consumption of alcohol are often said to go hand in hand. While this may be true, drinking heavily on the course doesn't much help in the way of lowering your score, but it will most certainly lead to a hemorrhaging pocketbook. And, what's more, if you're careful about how much you consume, you can always use your heightened senses and finer motor skills to take advantage of competitors who may not be so inclined to control their drinking.

8. Be mindful about each and every shot.

Don't think this tip will save you much money? Well think again. If the whole point of golf is to both enjoy yourself and lower your handicap, then focusing on each shot works toward both objectives. Just as the enjoyment of fine cuisine is only possible through eating slowly and thoughtfully, so too, does careful and self-aware playing lead to a better overall experience. Mindlessly hacking through a course means that you aren't getting as much bang for your buck. The quantity of practice, in which shelling out more dough becomes necessary, isn't as important as the quality of practice. Think before you swing, every single time.

Today's help a reader is from me, FMF. Here's a situation where I need some input:

Our often-planned, often-delayed family trip to Chicago is now on for the end of September. We have the days planned, the travel planned, the activities planned -- all we need is a good place to stay for a decent price.

We have two target hotels -- one I've stayed at before and the other a chain I stay with when I do most of my business travel -- both in locations where we want to stay downtown. Here's my question: how do I get the best price from each of these hotels?

A couple extra comments/thoughts:

We prefer to book at least a bit in advance. We're not the "show up and try to bargain for a room" types (we'd prefer the discount upfront and not risk the chance of all hotels being booked.)

As I said, we have specific hotels in mind. Hence an online service where the hotel isn't known will not work for us.

The two options we've considered so far are:

Calling the hotel directly. Oftentimes the hotels have deals/rooms that the national call-in centers don't have. Of course we'll use all discounts we have to get them down (AAA, frequent traveler, etc.)

Bidding online somehow for the exact hotel(s) we want. Anyone done this and been successful with it? If so, can you walk me through the basic steps?

So far we've been able to find decent prices on the hotels by searching a number of alternatives, but we're looking to improve upon those (of course, right?) ;-)

July 19, 2010

Background: Married, Age: Mid 20-s, combined take home income is around $4,300/mth, No kids

Question: With no debt now (Have finished paying off $25k student loans, $20k in car loans) except our $110k mortgage I need to get some guidance and feedback on where to go now with our leftover money.

We have about $3,100k in expenditures a month on average taking into account some unusual unplanned expenses that always seem to creep up over the course of a year.

What is my best option given that after paying off all this debt I'm currently down to about $13k in Savings. I'm thinking beef up the emergency fund to $20-$25k before moving on to any other of the options as of now. Then again some would probably argue I miss out on compounding interest if I skip out on the investing. I'd be interested to see how others would rank the options given this situation.

I agree that these are great traits and that if you have any of them (and the more you have, generally the better) you will improve your chances of becoming a millionaire. Then again, the people this series highlights as having these traits and being successful financially are Bill Gates, Warren Buffett, and Donald Trump -- not exactly a group that most of us can aspire to be in.

But luckily, we don't need to be in the company of these people (or have their traits) to become wealthy (and certainly not to become a millionaire.) In fact, I think there are only three traits anyone needs to have to become wealthy -- and most of us can muster up adequate amounts of these to be successful if we want to. My list:

Ambition -- You have to have at least a decent income to become wealthy, and the higher it goes, the more likely you can become wealthy. Yes, some people can and have become millionaires while making $40,000 a year, but it's easier to do if you make $80,000 annually, now isn't it? ;-)

Discipline -- I've said it a million times: no matter what you make, you have to spend less than that or you're going backwards financially. And to control your spending, you must have discipline. You have to be able to tell yourself "no" and sacrifice some things (like multiple, expensive vacations every year as an example) in favor of achieving a greater goal (becoming wealthy). IMO, discipline is THE key trait that separates the wealthy from the no-so-wealthy.

Perseverance -- You have to be able to stick to a financial plan in order to be wealthy. There will be rough times (in your job, in your finances, etc.), but if you persevere through them, you can be wealthy despite the setbacks that most of us face during our lives. For sure there are some catastrophic events that can derail anyone, but even with those you will need to keep plugging to make the best of a bad situation.

So those are my three -- what do you think? Did I get any wrong? Miss any?

I'll post a few more tidbits from this book in the days to come, but for now I'll address my thoughts on some of these questions:

Am I ready to retire? I think I will be. I always have a large list of interests I'd like to pursue if I had the time, so I don't think I'll be bored in retirement.

Can I afford to retire? Not yet, but I'm working on it. Should be able to retire early (well before 60) in 10 years or so if all goes well.

When should I apply for Social Security? There's great debate on what the "best" time to take Social Security is. I'll make that decision as the time approaches, but for now I'm not counting on SS income to help me in retirement and my plan is to delay taking it for as long as possible.

What should I do about health insurance? I've said before that I'll likely work at least a bit during retirement. One key consideration of where to work could hinge on where I can find health care coverage.

Where do I want to live after I retire? A big, big question. A few options: stay where we are, move homes but live in the same general area, move to a nicer (warmer) part of the country, move to where one (or both) of our kids live (depending on where they end up.) Lots to decide when it gets to that time.

How can I age successfully? Man, if you had the answer to this, you'd be a billionaire. ;-)

For big purchases. Credit cards allow you to withhold payment if something goes wrong with your purchase, and the card issuer often investigates the problem for you. Some credit cards add up to a year to the manufacturer's warranty on the products you buy with them. You may also get additional protections against fraud, damage, identity theft, or plain old theft.

For gas, hotels, and car rentals. Some hotels, gas stations, restaurants, auto rental companies, and retailers put a hold on the money in your checking account until a debit transaction is processed, which might take up to several days for signature-based payments. What's more, the amount that's blocked can significantly exceed the amount of your purchase. These holds can prevent you from accessing the funds in your bank account and result in bounced checks, declined transactions, or overdraft charges.

To earn rewards. Fewer debit cards have rewards programs, and the programs of the ones that do aren't as good as those of credit cards.

When safety is paramount. Under federal law, your liability for fraudulent charges on a debit card can be greater than it is for a credit card. You're responsible for up to $50 in unauthorized purchases on your credit cards. But with a debit card, you can lose up to $500 if you don't report the theft or loss of your card or PIN within two business days of discovering the problem.

Use a debit card:

For budgeting. You may be inclined to spend less using debit, since you generally know how much money you have in your bank account.

Ok, so much for the benefits of using a debit card. If you can't keep a handle on spending, use a debit card. Otherwise credit cards are always better. Is that what they are saying?

Personally, I prefer credit cards, especially for the rewards. I'm going to rack up a boatload of extra cash this year by using my 2% Schwab Visa on things I would have paid for by check or cash -- so why not get the extra 2%? I'll give you the final details at the end of the year, but I'm guessing it will be $600 or so by the time the year is over. I'll take it!

Before reading this (and even after reading it) I would have said "not having enough money" would have been the biggest obstacle to retirement. Yes, this could have many different meanings -- not enough saved, too much debt, too many expenses (health care), etc. -- but the result is the same, the person can't retire because he/she doesn't have enough money to retire.

It's one of these sub-points that US News lists as their biggest obstacle. Their words:

At first it would seem that the biggest obstacle to retirement is not having enough money. Most people simply don't have enough in the bank to retire comfortably. While that is certainly a big part of the equation, it's just the tip of the iceberg. Why don't many people have enough money to retire? They didn't save enough, of course. But why didn't they save enough? And that brings us to what is, for many, the biggest obstacle to retirement--debt. And the problem isn't just any debt. The problem is non-mortgage debt.

Non-mortgage debt creates a triple-whammy when it comes to retirement. First, during your working years you have less to save toward retirement because you must make payments on your debt. Second, unlike a mortgage payment that goes toward a home that over the long term goes up in value, consumer debt usually goes to pay for things that have no lasting monetary value. And third, in retirement you need more income because, in addition to your regular monthly expenses, you must keep making payments on the non-mortgage debt you've racked up. As a result, many save less during their working years and need more during retirement.

You might disagree, but my opinion is that the average American is not a great manager of his/her money. As such, they ignore the basics that are required to do well financially (and thus retire). And to add more fuel to the fire, many then compound their problems by making horrible money mistakes. Poor money management + bad financial mistakes = you're not retiring anytime soon.

Sure, debt is a major problem (and especially "bad debt" like credit card debt). But it's really just an indication of the main issue -- people can't control their spending.

What's your take on the issue? What do you thin the #1 obstacle to retirement is?

Money is a consideration for the majority of people when dealing with the cost of health care for animals, according to an Associated Press-Petside.com poll conducted by GfK Roper Public Affairs & Media.

While most pet owners, 62 percent, would likely get vet care if the bill was $500, the percentage drops below half when the cost hits $1,000. The number drops to 35 percent if the cost is $2,000 and to 22 percent if it reaches $5,000.

Only at the $500 level are dog owners (74 percent) more likely than cat owners (46 percent) to say they would likely seek treatment. In the higher price ranges, the two are about equally likely to seek vet care.

So, what does this tell us? Not much really. Yeah, it gives us some interesting facts, but it doesn't really reveal anything. As someone who has worked with survey results for 20 years, I can verify that there's a HUGE difference in most cases between what people say they will do and what they actually will do when the situation arises. In general, people over-estimate the "good" they would do in order to feel better about themselves. As such, I think the number of people who would actually spend the amounts above to save their pets is much lower than what's reported.

But there is a useful set of reminders in this information. Namely:

Pets (and especially pet medical care) can be expensive.

Before you get a pet, you should recognize this potential expense and consider whether or not you really can afford a pet.

In addition, you need to have some sort of guideline as to what you will and won't spend to save a pet's life. Then, you need to save accordingly so your emergency fund can cover an unexpected, high-cost pet medical bill.

Anyone out there have anything to add on the issue of pets and spending to save them?

Giving to charitable causes and wealth are complements, not substitutes, as logic might seem to dictate. Two groups of high-income producers were studied. Both groups were statistically identical in terms of income and age. The first group contained those who gave at least 10 percent of their annual realized income to charitable causes each year. The second group gave 1 percent or less. In terms of average dollars amounts [of net worth generated], the first group significantly outpaced the second [by about 20 to 1].

How is it possible that the group which donated significantly more money was able to accumulate more wealth? People allocate their dollars in ways they feel will give them the greatest satisfaction. I believe that these people feel that giving is a substitute for spending more on products and pleasure-related services. They seem to get more satisfaction from accumulating wealth and giving than from consuming more. If you spend a large proportion of your income on prestige brands of products, you have fewer dollars remaining with which to save, invest, or even donate. And those who gave 1 percent or less of their income to noble causes were, in fact, found to spend significantly more and invest much less than their more generous counterparts.

The more generous group was found to have spent fewer dollars on the impediments to building wealth: income taxes, homes, clothing and accessories, motor vehicles, mortgages, interest on personal loans, club dues, and vacations. Those who gave more also had a history of allocating more money to the foundation stones of accumulating wealth, including investments, pension or annuity contributions, and fees for professional financial advice and asset-management services.

Several comments on this:

Wow, this guy is reading my mail. If you've been visiting FMF for any length of time, you know that this set of comments is pretty much in line with how I think about and manage money.

"I believe that these people feel that giving is a substitute for spending more on products and pleasure-related services." Has anyone seen Schindler's List? At the end of the movie Schindler is looking at all the material things he owns (a ring, a car, etc.) and wonders how many more people could have been saved if he had simply not purchased these (indulgences) and instead spent the money on rescuing people.

This is similar to how my wife and I feel about giving to help others. I say "similar" because this line of thinking can lead down a very slippery slope. You start with "we don't need a $500,000 home, we can have a less expensive home and help others with the difference" but taken to an extreme you end up with "why do we need any home -- why don't we live on the street and give everything to help others?" So there's a balance between sacrificing yourself/helping others and providing reasonably for your family as well as having extra to save and enjoy.

But that said, why would we need to drive a Lexus when we're just as happy driving a Subaru and helping others with the difference? Why live in a $500k home (which we could afford to do) when a $170,000 (2,800 square feet, btw) house is just as good to us and allows us to give more? Why buy designer clothes so we can tell the world how wealthy we are when there are often less expensive alternatives that are just as good? Then we can give more to stop some of the problems in the world.

There are people dying every day because they don't have enough food to eat, clean water to drink, the right medicines to take, and so on. I would prefer to "make do" (which really isn't making due -- I don't think I would enjoy the more-expensive alternatives any more than I enjoy what I have) and then give to help save some people from around the world rather than spend, spend, spend on myself.

I'm not trying to make the above a guilt-trip for anyone or even saying that those reading should do the same. In fact, I'm acting in my own best, selfish interest. I'm doing something (giving) that gives me more joy than something else (spending on myself.) The joy of helping others is almost addictive, as you will find out if you ask anyone who likes to give (or if you're such a person yourself.) That said, I wish more people would discover the joy of giving versus spending more on "things."

"They seem to get more satisfaction from accumulating wealth and giving than from consuming more." I've covered the latter above, but I just wanted to add that I do also get satisfaction from accumulating wealth as well. Call it independence, call it freedom, call it peace of mind -- name it what you will -- but there are a lot of great, intangible feelings associated with becoming wealthy that money simply can't buy. Oh wait, I guess money can buy them. ;-)

We certainly spend less on things like homes, any sort of debt (we have none), club dues, and the like and more on investing, saving, and related activities. Yes, I practice what I preach.

Wait! You mean "annuity contributions and fees for professional financial advice and asset-management services" are part of "the foundation stones of accumulating wealth"? Hmmmm. I don't spend anything on these (unless you include the low costs associated with investing in index funds.)

What about you? Does any of this ring true with your own giving/saving/investing experience?

July 14, 2010

The summer edition of the Charles Schwab On Investing magazine lists the following five tips when starting a new job:

1. Sign up for your employer's 401k.2. Make every effort to rebuild your emergency savings (if you drew them down while unemployed.)3. Reassess your budget.4. Claim the right number of withholding allowances.5. Take full advantage of health and life insurance plans.

My thoughts on these:

1. Of course! Never pass up free money (assuming your employer offers a match.) I've been contributing the maximum to my 401k for over 15 years now and it's a major source of our net worth.

2. Your emergency fund is your first line of defense against having to borrow. ALWAYS be sure it is fully funded (and re-funded asap if drawn down.)

3. Hopefully you'll be making more money at your new job. If so, it's a great time to refigure/readjust your budget.

4. This is a moving target for those of us who may or may not receive annual bonuses, but do the best you can to come out even at the end of the year.

5. I'd add disability benefits to the list as well, though fewer and fewer employers are offering this benefit (or at least it seems so to me.)

With concerns over national debt levels and the Federal Reserve printing money like confetti inflation worries abound (and not without good reason!). Traditionally physical ownership of precious metals, most notably gold, has been the main way to protect assets against inflation risk. However, today TIPS are being pushed as a “safe” (or “safer”?) way to get protection. The popularity of TIPS as mushroomed, fueled by both these concerns and eager financial gurus touting them as the best thing since beer in a can.

TIPS – Treasury Inflation-Protected Securities – for those who have yet not heard of them are U.S. Federal Treasury bonds that contain an inflation adjustment component to the interest calculation. They have a fixed coupon rate plus an inflation adjustment add-on to the principle amount. The purpose is to add (or decrease) the inflation adjustment to the principle amount (face value) rate annually. This results in increased (or decreased) semi-annual interest payments a s interest is computed on the adjusted principle amount, and, at maturity you receive the great of the face value of the bond or the adjusted principle.

Sounds like a sweet deal!

But all that glitters isn’t gold. The U.S. Treasury isn’t offering TIPS (and I-Bonds) out of the sheer grace of their over-paid Federal hearts.

TIPS, gold and inflation all have an intertwined history.

The double-digit inflation of the early 80’s saw investors and individuals flock to gold as a protection. They sold securities – most notably fixed income Treasury bonds – to raise the cash to buy gold. New cash was also put into gold instead of Treasuries. The result was obvious to happen: Gold reached then-record highs and the U.S. Treasury had a liquidity problem.

If the government printed more money that added to inflation. If they didn’t interest rates would have to rise to lure back investors to buy Treasury bonds. In the end a combination of approached worked to lower inflation and bring back Treasury investors. But the government learned a lesson.

Enter TIPS.

TIPS has the affect of essentially monetizing inflation. Rather than holding a real, physical, tangible and historically valuable item like gold as a protection against inflation and the unknown, now you can own paper as your protection. Oh joy! And now the Treasury can attract and keep more investors instead of loosing them to gold (which is why in the current economy, while gold is at record highs, it has been a slower climb and not as high on an inflation-adjusted basis as the high of the 80’s).

The promise of one paper to protect you against loss of another paper. Seems rock solid to MasterPo!

But there are a few annoying things still nagging at MasterPo.

First, there’s the whole sovereign debt issue (a la Greece). The U.S. may be bigger but at $13.7 TRILLION in national debt (as of writing this) don’t think it can’t happen here.

Second, there’s the politics. The Obama White House announced there was no inflation in 2009. Phuleeze! And it’s been leaked they plan to say there will be no inflation in 2010 and 2011. How wonderful they can predict that!

But let’s go with Fantasy Land for this example. No inflation in 2009, 2010, or 2011 according to the White House.

So explain to an old MasterPo: If the White House says there’s no inflation how can the Treasury give an inflation adjustment to TIPS?!

Third, gold has real value worldwide. Unless something civilization shaking happens on a global scale there will always be an eager market for gold (and if something like that does happen cashing in your gold will probably be the least of your worries!). Can’t say the same for sovereign paper.

If all works out fine and dandy TIPS as concept is great.

But TIPS are only paper. And what looks good on paper doesn’t always play out the same in the real world.

Later on in the book Stop Acting Rich: ...And Start Living Like A Real Millionaire the author makes a point about a group of millionaires who didn't have to earn a high income in order to become wealthy. He talks about millionaires who live in homes worth $400,000 or less (91% report they are extremely happy with life) and has this to say about them:

Most of the people who make up this low-profile millionaire segment never earned very high incomes. In fact, the median household annual realized income (from all sources) of this group was $113,334 at the time they first reached millionaire status. However, most people will never earn enough money to become wealthy and to be hyperconsumers at the same time. Do you want to become wealthy? If you do, you might want to follow the ways and means of this affluent group.

He goes on to say that the key to becoming wealthy is, as you might guess, spending less than you earn.

A few thoughts here:

While it's not a fortune, $113k is nothing to sneeze at either. It's way more than most people earn.

That said, the income certainly isn't "very high" as he notes in his first sentence. In addition, this is the income these millionaires had when they first became millionaires. This means (most likely) that they had salaries that were below this level that got them to millionaire status.

Still, it's likely they had "good" salaries for much of the time on the road to millionaire-ville. That's why we not only need to keep spending under control but also make the most of our careers -- so we can maximize income. Yes, you can become a millionaire while you make $40,000 a year, or $60,000 a year, or $80,000 a year. But it's easier to do so if you make $120,000 a year, $150,000 a year, or $200,000 a year, right?

Let's look at an example. If you earn $50,000 a year and save/invest $5,000 a year (using the "pay yourself first"/save 10% of your income guidelines) and it grows at 8% per year, you'll be a millionaire in 36 years. Looking at these numbers, you can see how someone making $75,000 then $90,000 then $113,334 a year could become wealthy well before 36 years, especially if that savings is matched in whole or part by something like an employer's 401k program.

July 13, 2010

Here’s my situation: my fiancée is 50,000 in debt...I am 20,000 in debt...I just graduated from 7 years of school and am currently looking for a job of which I studied so long for. She told me I have to marry her on July 24th or she's leaving the relationship. I explained to her that I need to get my feet on the ground (with a job, car etc. etc) so that we could help cushion the debt-load before marriage. She didn't like that answer at all, gave me the ring back and wanted nothing to do with me.

If you are a personal finance geek, then you’re probably always looking for ways to save money by doing it yourself. Why pay someone else to do something you can handle on your own? Now, managing your personal finances on your own is easier than ever with the use of personal finance iPhone apps. With the time and money you save, your iPhone will practically pay for itself! There are dozens of these types of apps available through the iTunes store, but here are five must-haves.

1. PageOnce Personal Finance This application lets you monitor a variety of accounts on your phone. This well-respected company has arrangements with thousands of banks, credit card companies, and online retailers that allow you to organize your account and complete secure transaction. You can even check your cell phone minutes and frequent flyer miles in one place. Seeing everything in one place helps you make better decisions about investments and large purchases, and the credit card organizer ensures you will never get behind on payments. There is a free version, but for the premium version without the advertising, you'll need to get the paid version.

2. Bloomberg With the Bloomberg name, you know you can trust this app to organize your investment tools well and provide you with up-to-date personal financial news. The app is free and available in 12 different languages, which could be a major plus for some investors. Investment success and failure can come down to making decisions at just the right moment, so iPhone owners should take full advantage of the power at their fingertips. If you need real-time portfolio tracking right on your iPhone, get this app.

3. Spend - Budgeting This app is a budget tracker specifically tailored to your needs. You can track on any timescale (daily, monthly, semi-yearly, etc.), and schedule both recurring and one-time expenses. Create different budgets for work and home, and easily move around funds. Find out where your money is going so you can make more educated decisions about where to cut back. Seeing it all on your phone just makes it that much easier.

4. DebtTracker Pro by SnapTap Probably all personal finance geeks would rather manage wealth than debt, but sometimes it becomes a necessity. The DebtTracker app manages loan information and creates payoff schedules with reminders. It allows the freedom to calculate different levels of debt based on hypothetical principal payments. It requires you to put in a lot of information yourself, but it keeps you disciplined and on track.

5. Save Benjis This app is popular with both major investors and coupon-clipping soccer moms. It allows you to instantly compare prices on nearly any item based on in-store and Internet prices. With all of the effort you put into personal finance, you cannot afford to lose it all by simply shopping unwisely. But don’t waste your time shopping around for the best price. Let Save Benjis do it for you!

While I was promoting The Millionaire Next Door on the Oprah Winfrey Show, a rather well dressed woman from the audience asked me the same question I had heard a thousand times before: "What good does it do to have all this money if you don't spend it?" The woman was agitated, even indignant, that I was touting frugality. She further indicated that "these people couldn't possibly be happy." She, like most people who are not wealthy, believed that the more one spends, the more satisfying life is. Thus, more money translates into more spending and therefore more happiness. But she does not completely understand the benefits of being wealthy. It has much more to do with being financially independent and secure than owning prestige brands. High self-esteem is related to achieving financial independence. Both the sense of achievement that comes from success and financial independence lead to happiness and life satisfaction, not meaningless badges.

What percentage of the millionaires who live in homes valued at under $400,000 are happy? More than 9 in 10 (91%) indicate that they are extremely satisfied with life.

I wanted to publish this set of comments because I get this sort of reaction quite often. People imagine that "spending less than you earn" or "living below your means" is a horrible, deprived lifestyle that people force themselves to suffer through simply because they want to be wealthy. And along the way they don't spend a cent on anything enjoyable, so ultimately they end up dying wealthy, but have wasted their lives in a miserable existence.

Let me make a few comments to hopefully set the record straight:

I have never seen any research that shows spending higher levels of money makes people happier (if there is some, I'd certainly like to look it over.) So we can dismiss the notion that spending on the "finer things in life" automatically leads to happiness.

I do know that people often worry about their financial situations and that this can cause great personal stress (which is very unhealthy) as well as marriage/family problems (money difficulties is always listed as one of the main reasons for divorce). So having a lack of resources is certainly a problem for many. And who has a lack of resources? Those people who spend a lot of money -- specifically, those who spend close to or more than they earn. As such, spending a lot of money might actually be more closely related to unhappiness rather than happiness.

Why is it assumed that in order to spend less than you earn that you have to deprive yourself of enjoyable things you'd like to do? This is simply not the case. Consider these two people:

Joe earns $50,000 a year.

Joe needs $40,000 for his "needs" in live -- food, clothing, shelter, transportation.

Joe spends $10,000 a year on all the fun and extra "stuff" he can buy.

Jim earns $75,000 a year.

Jim needs $40,000 for his "needs" in live -- food, clothing, shelter, transportation.

Joe spends everything he makes with no savings or financial cushion at all. He's the classic "spend all you can" American. Jim, on the other hand, keeps his base spending low (it's the same as Joe's, even though Jim earns 50% more). This gives him room to spend a good amount on "fun" things (more than Joe spends) and still save a boatload of money. Of course this is just an example -- he could save more or less or spend more or less, but you get the idea.

Sure, it's easier for him to do this because he makes more. That's why I highlight the fact regularly that we all need to be working to make the most of our careers. A higher income allows us to "do it all" -- cover our needs (assuming we've kept them under control), spend some on enjoyable activities, and still save to build wealth.

Many people enjoy the "simpler things in life" and don't have the same standards for "enjoying life" as others. For me, I'd just as soon spend a long vacation with family sitting around and chatting on the front porch (and relaxing) rather than take a whirlwind tour to Europe. And guess which one costs far less? Some would say I'm missing out, but I don't think so. I'm building great relationships and loving what I'm doing. That doesn't mean I won't take a big vacation now and then (we're actually planning a trip to Europe in the next three years), but it's not a regular occurrence for our family. We enjoy time together more than anything else and that's just as easy to do (and far less expensive) on a friend's boat in Lake Michigan as it is sitting on the beaches of Hawaii. But like I said above, it's not an either/or choice. Just refer back to Jim's situation for a reminder.

As noted above, there is a true enjoyment in simply being financially secure. I couldn't agree more with the statement that "success and financial independence lead to happiness and life satisfaction."

Between the fall and spring soccer seasons, there was one major event that took place. I went to a class and passed the test to become a Level 8 US Soccer Federation referee. I know this doesn't mean anything to most of you, but the summary is that with this level of certification I was now able to be a center referee at our paid games -- which generally pays twice as much or more than what assistant referees (ARs, aka linesmen) are paid. BTW, my son wasn't able to take the class/test because he's not old enough. So he remained a Level 9 referee and was still able to be an AR for paid games.

This year's money-making effort was complicated by the fact that my son decided to PLAY soccer this season as well as referee. And he played not just for one team but for two of them. Since 95% of soccer games in our area are on Saturdays, this meant that much of the time that could have been spent making money was instead allocated to playing/watching soccer. That was a trade-off I was happy to make, but it certainly did impact our earning results. (BTW, I did referee several of his games -- they were AYSO/non-paid games -- and was about 10-yards away from him when he scored his first goal of the year. Priceless!)

Anyway, here are our results (for both of us combined):

Number of games: 13

Amount earned: $440

Amount earned per game: $33.85

And for comparison, here are last fall's results:

Number of games: 19

Amount earned: $465

Amount earned per game: $24.47

And a few other pieces of information:

Non-paid/volunteer/community/AYSO games refereed this spring: 17 (including 7 at a year-end tournament)

Costs incurred (equipment, classes, etc.): $80

Mileage incurred: 265

In addition to the pay above, we received $60 in Applebee's gift cards and some free referee equipment (not to mention all the food we could eat from the snack bar) for working a tournament at the end of the year.

A few comments given this information:

We only did 13 games this season but we made much more per game (due to the fact that I center reffed many games as well as the fact that we reffed higher-level -- thus better paying -- games this season). Thus we ended up making almost as much in absolute dollars.

When you look at the expenses (and assume a cost of $0.50 per mile), you'll see that we made very little, roughly $230. On a per hour basis, this pay is really low.

My son, who pays none of the costs and to whom $220 is a lot of money, LOVES this deal. He's rich! Me, not so much.

We do have fun at it, get some exercise, and enjoy being together doing something we both like. So what I think we have more than anything else is a hobby that just happens to pay us a bit of money.

If we wanted, we could make a lot more. My son could quit playing and we could stop doing volunteer games. This would give us more time to ref paid games and likely make $75 or more every weekend. Then we could add tournaments to the mix and really clear some "big bucks" (relatively speaking.) But we enjoy my son playing as well as helping the community AYSO league by volunteering, so we're not likely to do this. But if I ever found myself out of a job, I could ramp up refereeing and make a decent supplemental income. I have one friend who does this. His hours at work were cut, so he added more refereeing, including high school games, to make up the difference.

We have all of our equipment as well as our certifications through 2010, so this fall the only regular expenses we'll have will be mileage. I'm sure we'll ref 13 games or so again and should have lower expenses than this spring.

I'll give you all a performance update at the end of the fall season this year. Stay tuned.

I will be inheriting roughly 500,000 to 750,000 thousand dollars and I am 22, I have a career job (commercial A/C tech) that I am moving up in and my soon to be wife is a software engineer and makes good money, we already have a house and I am only in 4000 dollars of dept and she just owns money for a car and house, about 320,000 of that is stocks and investments.

Any advice on what to do with roughly 300,000 CASH? We are both pretty good with money but never saw this one coming in out early life. It is overwhelming but I want to be smart and try to make millions someday with it.